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PETITIONER: SALES TAX OFFICER, JODHPUR AND ANOTHER

       Vs.

RESPONDENT: M/S. SHIV RATAN G. MOHATTA

DATE OF JUDGMENT: 12/02/1965

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. GAJENDRAGADKAR, P.B. (CJ) HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1966 AIR  142            1965 SCR  (3)  71  CITATOR INFO :  RF         1975 SC1652  (12)

ACT:     Constitution     of     India.     Arts.     226     and 286(1)(b)--Questions  of fact  to determine whether sale  in the   course   of   import--Therefore  if  State  sales  tax leviable--Whether should be decided in  writ  proceedings.

HEADNOTE:     The Sales Tax Officer rejected the assessed’s claim that he was not liable to be assessed to sales tax in respect  of certain .sales of cement imported from Pakistan because  (i) he  was  not a. dealer within the meaning of s.2(f)  of  the Rajas  than Act 29 of 1954, and (ii) the sales  in  question were in the course of the import within the meaning of  Art. 286(1)(b)   of   the  Constitution.  In   the    order    of assessment,  there  was  no discussion of  the  question  of applicability of Art. 286(1) (b).    The  assessee therefore filed a petition under  Art.  226 challenging the assessment order on the grounds taken before the Sales Tax Officer and also claiming that the latter  had failed to consider the impact and effect of Art. 286(1)(b)on the   facts  of  the  case.  The  State  objected   to   the maintainability  of  the  petition on the  ground  that  the petitioner should have availed of the alternative remedy  of appeal  provided under the Rajasthan Sales Tax Act, but  the High  Court overruled this objection for the  reason,  inter alia,  that  the petitioner had challenged  the  appellant’s jurisdiction  to  assess him to. sales tax in view  of  the. provisions of Art. 286(1) (b). Upon dealing with the  merits of  the case, the High Court held that on the facts  of  the case it was clear that the sales in question took place when the  goods  were in the course of import and  therefore,  by virtue  of Art. 286(1)(b) were not liable to sales tax.  The court therefore quashed the order of assessment.     On  appeal  to  this  Court,   it   was   contended   on behalf  of the State that the High Court should have refused to  entertain the petition as many of the crucial facts  had not  been  brought  on the record  by  the  respondent,  and further-more,  it  was not established that the  cement  was

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sold in the course of import into India.     HELD:  The  High  Court  should  not  have  decided  the disputed  questions of fact, but should merely have  quashed the   assessment  order on the. ground that  the  Sales  Tax Officer  had not dealt  with the question raised before  him and remanded the case. [77 B]     OBITER:   The  High  Court  should  have   declined   to entertain  the  petition,  as in this  case  there  were  no exceptional  circumstances  to warrant the exercise  of  the extraordinary  jurisdiction under Art. 226. It was  not  the object  of Art. 226 to convert High Courts into original  or appellate assessing authorities whenever the assessee  chose to attack an assessment order on the ground that a sale  was made in the course of import and was therefore exempt   from tax.  The fact that an assessee might have to deposit  sales tax  when filing an appeal could not in every  case  justify his  bypassing the remedies provided by the Sales  Tax  Act. There  must  be  something more in a  case  to  warrant  the entertainment of a petition  under Art. 226, something going to the root of the jurisdiction of the Sales 72 Tax  Officer, something to show that it would be a  case  of palpable injustice to the assessee to force him to adopt the remedies provided by the Act. [75 G, H] A.V. Venkatesweran v. Ramchand  Sobhraj  Wadwani,     A.I.R. 1961 S.C. 1506, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION:Civil Appeal No. 652 of  1964,    Appeal  from the judgment and order dated May 7, 1963  of the  Rajasthan High Court in D.B. Civil Misc. Writ  Petition No. 157 of 1962.     G.C.  Kasliwal,  Advocate-General  for  Rajasthan.  K.K. Jain, for the appellants. M.D. Bhargava and B.D. Sharma, for the respondent. The Judgment of the Court was delivered by Siki,  J. This appeal by certificate of fitness  granted  by the  Rajasthan High Court is directed against  its  judgment dated  May 7, 1963, quashing the order of  assessment  dated March 5, 1962, made by the Sales Tax Officer, Jodhpur  City, in  so  far as it levied sales tax on the  turnover  of  Rs. 23,92,252.75 np.     The  respondent, M/s Shiv Ratan G. Mohatta,  which is  a partnership   firm  having  its  head  office  at   Jodhpur, hereinafter referred to as the assessee, claimed before  the Sales  Tax Officer that they were not liable to be  assessed to  sales  tax  in respect of the  above  turnover  because, firstly, the assessee was not a dealer within s. 2(f) of the Rajasthan Sales Tax  Act  (Rajasthan Act XXlX of 1954)  with respect  to this turnover, and secondly, because  the  sales were  in the course if import within Art. 286 (1)(b) of  the Constitution.  Although the  Sales Tax  Officer set out  the facts    of    the    case   relating    to    the    second ground,  he deemed it sufficient to assess this turnover  on the ground that the assessee was a dealer within s. 2(f)  of the Rajasthan Sales Tax Act, without adverting to the second ground.  The facts on which the assessee had relied upon  to substantiate  his  second ground were  these.  The  Zeal-Pak Cement  Factory,  Hyderabad  (Pakistan), hereinafter  called the Pakistan Factory, manufactured  cement in Pakistan.  The Pakistan  Industrial  Development  Corporation,  hereinafter called  the Pakistan Corporation, entered into an  agreement with M/s Milkhiram and Sons (P) Ltd., Bombay, for the export

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of  cement  manufactured  in Pakistan to  India.  The  State Trading Corporation of India entered into an agreement  with the  said  M/s Milkhiram & Sons for the purchase  of,  inter alia,  35,000  long  tons of cement to be  delivered  to  it F.O.R.  Khokhropar in Pakistan, on the border of  Rajasthan. The State Trading Corporation appointed the assessee as  its agent,  broadly speaking,  to look after the import and  the sale  of the imported cement. The modus operandi adopted  by the  assessee for the sale of the cement was as follows.  It would  obtain from a buyer in  Rajasthan  an order under  an agreement, a sample of which is on the record 73 The  agreement fixed the  price and the terms of supply.  By one  clause  the  assessee  disclaimed  any   responsibility regarding  delay in dispatch and non-receipt of  consignment or any loss, damage or shortage in transit due to any reason whatsoever. The agreement further provided that "all  claims for loss, damage or shortage, etc., during transit will  lie with the carriers and our payments are not to be delayed  on any such account whatsoever." It was further provided in the agreement that the dues were payable in advance in full,  or 90%  in advance and the balance within  15 days  of  billing plus  sales  tax  and other local taxes.  Clause  6  of  the agreement is in the following terms:                     "A Post Card Loading Advice will be sent               to  you by the Factory as soon as  the  wagons               are  loaded in respect of your orders, and  it               will  be your responsibility  to  arrange  for               unloading the consignment timely according  to               Railway  Rules. Ourselves. and  the  suppliers               will not be responsible for demurrage etc.  on               any  account  whatsoever. If  the  consignment               reaches  earlier than the Railway Receipt,  it               is the responsibility of buyer to  arrange for               and get the delivery timely against  indemnity               bond  etc. All the Railway Receipts etc.  will               be sent by registered post by the Suppliers in               Pakistan.".     After this agreement had been entered into, the assessee would   send   despatch   instructions   to   the   Pakistan Corporation.   These instructions indicated the name of  the buyer-consignee  and the destination, and provided that  the railway receipt and D/A should be sent by registered post to the consignee. These instructions were sent with a  covering letter  to  the Pakistan Corporation requesting  that  these instructions  be  passed  on to  the  Pakistan  Factory  for necessary  action.  The  Pakistan  Corporation  would   then forward  these despatch instructions to the Zeal-Pak  Cement Factory.  Later,  the  Pakistan  Factory  would  advise  the consignee  that  they  had "consigned to the State  Bank  of India,  Karachi,  the  particular quantity as  per  enclosed railway  receipt  and  invoice." The State  Bank  of  India, Karachi, would endorse the railway receipt in favour of  the consignee  and send it to him by post. The  consignee  would take delivery either by presentation of the railway  receipt or   by  giving  indemnity  bond  to  the  Station    Master undertaking to deliver the railway receipt on its receipt.     The  Sales Tax Officer did set out most of  these  facts and the contentions of the assessee in the assessment  order but  disposed of the case with the following observations:                      "All  the above went to prove that  the               assessee  was  an Agent  of  the  non-resident               dealer  for  the supplies in  the  State.  The               Assessee  was an importer and hence  submitted               an application to the Custom Authority for the

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             same. It booked orders and issued sale  bills.               Under the terms of an agreement of appointment               of Agent, sale was to be effec-               74               ted by the Agent. Again while obtaining orders               from  the buyers under condition 5  Sales  Tax               was to  be paid by the buyers to the assessee.                     Thus  to  all intents and  purposes  the               assessee is a dealer who is liable for payment               of  Sales Tax to the State. They have  rightly               collected this amount from the buying  dealers               and  retained with them. This should  come  to               the Government.".     We  can  find  no  discussion in   the   order  on   the question raised by the assessee that the sales were made  in the   course  of  import  within  Art.  286(1)(b)   of   the Constitution.    The assessee then filed a petition under art. 226 of  the Constitution  and  raised two contentions  before  the  High Court,  namely,  (1) that the Sales Tax  Officer  failed  to consider the impact and the effect of Art. 286(1)(b) on  the facts  of  the  case, and (2)  that the  Sales  Tax  Officer illegally  held  that  the petitioner for  all  intents  and purposes  was  a dealer liable to pay sales tax.  The  State raised  an objection to the maintainability of the  petition on  the  ground that the petitioner should have  availed  of the   alternative  remedy  of  appeal  provided  under   the Rajasthan  Sales Tax Act, but the High Court overruled  this objection  on  the  ground  that  "the  contention  of   the petitioner  is  that  in  view  of  Art.  286(1)(b)  of  the Constitution, the respondent had no  jurisdiction  to assess the petitioner to pay the sales tax on the sale of goods  in the  course of the import into the territory of India",  and that  even   if there was no total lack of  jurisdiction  in assessing  the  petitioner to pay sales tax.  the  principle enunciated  in  A.V.  Venkateswarn  v  Ram  chand   Sobharaj Wadhwani  (1) applied, and it was a  case  which should  not be dismissed in litnine.     Then the High Court proceeded to deal with the merits of the  case.  It  first dealt with the  question  whether  the petitioner was a dealer within the meaning of s. 2(f) of the Rajasthan  Sales  Tax Act, and came to the  conclusion  that the   petitioner  must  be deemed to be a dealer within  the said s. 2(f).     Then  it  proceeded to deal with the  question   whether the sales had taken place in the course of import. The  High Court held that in the circumstances of the case these sales had  not  occasioned the movement of goods but  it  was  the first  sale  made  by M/s Milkhiram and Sons  to  the  State Trading  Corporation  which had occasioned the  movement  of goods. Secondly, it held that  in  the circumstances of  the case  "the  property in goods after the  delivery  had  been taken  by  the  petitioner on behalf of  the  State  Trading Corporation  passed to the State Trading   Corporation   and simultaneously to the ultimate buyers. Thus the property  in the (1) [1962] 1 S.C.R. 753. 75 goods  passed to the ultimate buyers in Rajasthan  when  the goods  had  not reached the territory of India and  were  in course  of  import.  In  view  of  the  authority  of  their Lordships  of  the  Supreme Court in J.  V.  Gokal  and  Co. (Private)  Ltd.  v.  The Assistant Collector  of  Sales  Tax (Inspection) & Others, (’), it must  be  taken that the sale took  place when the goods were in the course of the  import

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and  they should not be liable to the payment of  the  Sales Tax  by virtue of Art. 286(1)(b).". In the result, the  High Court quashed the order of assessment in so far as it sought to  levy  tax  on the turnover in  dispute.  The  Sales  Tax Officer,  Jodhpur,   and  the  State  of  Rajasthan   having obtained  certificate of fitness from the High  Court  filed this appeal.     The  learned  Advocate-General  has  raised  two  points before  us: First, on the facts of this case the High  Court should have refused to entertain the petition, and secondly, that it has not been established that the cement was sold in the course of import within Art. 286(1)(b).    Regarding  the first point, he urges that an  appeal  lay against  the order of the Sales Tax Officer; no question  of the  validity  of  the Sales Tax Act was  involved  and  the taxability  of the turnover depended on where  the  property passed in each  consignment. This involved consideration  of various  facts and, according to him.the crucial  facts  had not  been brought on the record by the assessee on whom  lay the  onus to establish that the sales were in the course  of import.  He says that the assessee should have  proved  that each  railway  receipt  was endorsed by the  State  Bank  of India, Karachi, to the buyer before each consignment crossed the frontier.  We  are  of  the opinion that the High  Court  should  have declined   to   entertain  the  petition.   No   exceptional circumstances exist in this case to warrant the exercise  of the  extraordinary jurisdiction under Art. 226. It  was  not the object of art. 226 to convert High Courts into  original or  appellate  assessing authorities  whenever  an  assessee chose  to  attack an assessment order on the ground  that  a sale  was made in the course of import and therefore  exempt from  tax. It was urged on behalf of the assessee that  they would have had to deposit sales tax, while filing an appeal. Even  if  this is so. does this mean that in every  case  in which  the assessee has to deposit sales tax, he can  bypass the  remedies  provided by the Sales Tax  Act?  Surely  not. There  must  be  something more in a  case  to  warrant  the entertainment of a petition under art. 226, something  going to  the root of the jurisdiction of the Sales  Tax  Officer, something  to  show  that it would be  a  case  of  palpable injustice to the assessee to force him to adopt the remedies provided  by  the  Act.  But as  the  High  Court  chose  to entertain  the petition, we are not inclined to dismiss  the petition on this ground at this stage. (1)[1960] 2 S.C.R. 852. 76     Regarding  the  second  point,  the  learned   Advocate- General  .argues that the onus was on the assessee to  bring his  case  within  Art. 286(1)(b)  of  the  Constitution  in respect of the sales to the various consignees. He says that there is no evidence on record as to when the State Bank  of India endorsed the railway receipt in favour of the ultimate buyer  in  respect of  each  consignment  and  without  this evidence  it  cannot  be said that the title  to  the  goods passed to the ultimate buyer at Khokhropar or in the  course of  import.  He  further  urges that it  would  have  to  be investigated in each case as to when the State Bank endorsed the  railway receipt and when the goods crossed the  customs barrier. He says that it is not contested that the  ultimate buyer  took delivery of goods without producing the  railway receipt by virtue of  special arrangements entered into with the  railway,  and  according to him. it is  only  when  the delivery  was  taken by the buyer in  Rajasthan   that   the title passed. By that time, according to him, the course  of

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import had ceased.     We  do not think it necessary to consider  the   various arguments  addressed by the learned Advocate-General or  the soundness  of  the  view of the High Court  on  this  point, because we are of the opinion that the High Court should not have gone into this question on the facts of this case.  The Sales  Tax Officer had not dealt with the question  at  all, and  it is not the function  of  the High Court  under  art. 226,  in  taxing  matters,  to  constitute  itself  into  an original  authority or an appellate authority  to  determine questions  relating  to  the  taxability  of  a   particular turnover.   The  proper order in the circumstances  of  this case  would have been to quash the order of  assessment  and send the case back to the Sales Tax Officer to dispose of it according  to  law. Under the Rajasthan Sales Tax  Act,  and other  Sales  Tax Acts, the facts have to be  found  by  the assessing  authorities.  If any facts are not found  by  the Sales  Tax  Officer, they would be found  by  the  appellate authority.  and  it is not the function of a High  Court  to find  facts.   The  High  Court  should  not  encourage  the tendency  on  the part of the assesses to rush to  the  High Court after an assessment order  is made. It is only in very exceptional   circumstances  that  the  High  Court   should entertain  petitions under art. 226 of the  Constitution  in respect  of  taxing matters after an assessment  order   has been  made.  It is true, as said by this  Court  in  A.   V. Venkateswarn v. Ramchand Sobharaj Wadhwani(1) that it  would not be .desirable to lay down inflexible rules which  should be applied with rigidity in every case, but even so when the question of taxability depends upon a precise  determination of  facts and some of the facts  are in dispute or  missing, the  High Court should decline to decide such questions.  It is  true that at times the assessee alleges some  additional facts not found in the assessment order and the State, after a fresh investigation, admits these facts, but in a petition under art. (1)[1962] 1 S.C.R. 753. 77 226  where the prayer is for quashing an  assessment  order, the  High  Court  is necessarily confined to  the  facts  as stated  in the order or appearing on the record of the case.  In  this  case, as already indicated, we have come  to  the conclusion  that  the High Court should  not  have   decided disputed  questions of fact, but should merely have  quashed the  assessment  order  on the ground  that  the  Sales  Tax Officer  had not dealt with the question raised  before  him and remanded the case. Accordingly. we allow the appeal, set aside  the  order of the High Court,  quash  the  assessment order  in so far as it relates  to  the.  turnover   of  Rs. 23,92.252.75 up, and remit the case to the Sales Tax Officer to decide the case in accordance with law. He will find  all the  facts necessary for the determination of  the  question and  come  to an independent conclusion untrammeled  by  the views expressed by the High Court. We may make it clear that we  are not expressing any view whether the finding  of  the High   Court   that  the  property  in  the   goods   passed simultaneously   at   Khokhropar   to  the   State   Trading Corporation and the ultimate buyer is correct or not.  There would be no order as to costs in this appeal. Appeal allowed. B(N)3SCI --7 78